LOS ANGELES, Jan. 24, 2024 (GLOBE NEWSWIRE) -- Preferred Bank (NASDAQ: PFBC), one of the larger independent California banks, today reported results for the quarter ended December 31, 2023. Preferred Bank (“the Bank”) reported net income of $35.8 million or $2.60 per diluted share for the fourth quarter of 2023. This represents a decrease in net income of $3.7 million or 9.4% from the same quarter last year and down from the third quarter of 2023 as well. The primary driver of the decrease compared to both periods was net interest income which decreased by $4.7 million or 6.4% from the same period last year and was down by $3.6 million or 4.9% from the prior quarter. In addition to that, the Bank incurred a $929,000 loss this quarter on the sale of approximately $29 million of investment securities. The decline in net interest income was due to interest expense on deposits, which increased compared to both comparable periods. Partially offsetting the decrease in net interest income was non-interest expense, which came in lower than both comparable periods.
Overall, results were very strong and the Bank also provided for $3.5 million in provision for credit losses which has driven the allowance for credit losses to total loans up to 1.49%.
Highlights for the Quarter:
- Return on average assets was 2.15%
- Return on beginning equity of 21.21%
- Net interest margin was 4.24%
- Total loans increased $145 million or 2.83% for the quarter
- Efficiency ratio was 25.0%
- Quarter-end cash and equivalents continues to be strong at $911 million or 16.0% of total deposits
Highlights for the Year:
- Return on average assets was 2.28%
- Return on beginning equity of 23.80%
- Net interest margin was 4.49%
- Total loans increased $199 million or 3.92%
- Efficiency ratio was 25.8%
Li Yu, Chairman and CEO, commented, “Our fourth quarter net income was $35.8 or $2.60 per share and closed out the full year 2023 with record earnings of $150.04 million or $10.52 per diluted share. We attribute the record performance to active margin management and continuous effective cost control.
“Credit quality remains generally stable in the fourth quarter. Total criticized loans reduced from $98.6 million (1.92% of total loans) at September 30, 2023 to $83.0 million (1.57% of total loans). However, non-performing loans have increased from $19.4 million on September 30, 2023 to $28.7 million on December 31, 2023. The quarterly increase does not appear systemic. There were no loan charge-offs recorded during the fourth quarter. Provision expense for the quarter was $3.5 million, which has increased the allowance for credit losses to 1.49% of total loans at December 31, 2023.
“Loan and deposit growth for the year was below the historical standards of Preferred Bank but in-line with industry performance. The year 2023 was a year marked by high inflation, the last of the unprecedented Federal Reserve rate hikes and the regional Bank meltdown events of March. Looking forward, we expect that loan demand will gradually recover and that deposit costs will ease.
“During the quarter, the Bank announced an increase in our dividend by 27.3% to $2.80 per annum. In January, we have also announced the buyback of another $50 million of our common stock. With lower loan demand, we have been and will continue to deploy excess cash flow for the benefit of our shareholders. During the fourth quarter, we have also begun to restructure our securities portfolio by selling off some low yielding securities and replacing them with higher yielding securities. The loss on sale of $929,000 will not however, affect our capital ratios.
“Looking ahead, the year 2024 will likely be a less eventful year in banking than 2023. It seems to us that the banking industry will begin to have a “back to normal” process. We are hopeful to return to our historical growth pattern.”
Results of Operations
Net Interest Income and Net Interest Margin. Net interest income before provision for credit losses was $69.4 million for the fourth quarter of 2023. This was a decrease from the $74.1 million recorded in the same quarter last year and down from the $73.0 million posted in the third quarter of 2023. As the FOMC rate hikes appear to be at an end, the lag effect of increasing deposit costs has manifested itself in the form of higher deposit costs as the yield on earning assets has remained relatively flat since the last rate hike. The Bank’s taxable equivalent net interest margin declined by 15 basis points to 4.24%, from 4.39% last quarter. Comparing to the same quarter last year, which was close to the Bank’s peak NIM, the margin was down by 51 basis points from the 4.75% NIM posted in the fourth quarter of 2022.
Noninterest Income. For the fourth quarter of 2023, noninterest income was $2.1 million compared with $2.8 million for the same quarter last year and compared to 3.0 million for the third quarter of 2023. The decrease from both comparable periods was due to a $929,000 loss on sale of approximately $29 million in investment securities in the fourth quarter of 2023. This was done to reposition part of the portfolio into higher-yielding instruments. Service charges on deposits was up by $226,000 over the same period last year but down a bit from the $939,000 recorded in the third quarter of 2023. Letter of Credit (“LC”) fee income was $1.5 million for the quarter compared to $1.4 million in the prior quarter and compared to $1.2 million in the same quarter of last year. The increase is due to increased credit enhancement activity.
Noninterest Expense. Total noninterest expense was $17.9 million for the fourth quarter of 2023 compared to $19.0 million for the third quarter of 2023 and compared to the $20.0 million recorded in the same period last year. Comparing this quarter to the fourth quarter of last year, the major variances were; personnel expense decreased by $895,000 or 6.9%, occupancy expense was up by $92,000 or 6.4% due to the opening of the Bank’s new Irvine branch, other professional services increased by $327,000 due mainly to legal fees and other expense increased by $332,000 due to ICS reciprocal fees and higher FDIC premiums and finally, OREO expense was down by $1.8 million as the Bank recorded a $1.9 million valuation adjustment in the fourth quarter of 2022. In comparing the fourth quarter of 2023 to the prior quarter; personnel expense decreased by $950,000 or 7.3%, OREO expenses increased by $154,000 and other expense was down by $287,000 or 12.6%. For the quarter ended December 31, 2023, the Bank’s efficiency ratio was 25.0%, equaling the 25.0% posted last quarter and better than the 26.0% posted this quarter last year.
Income Taxes. The Bank recorded a provision for income taxes of $14.3 million for the fourth quarter of 2023. This represents an effective tax rate (“ETR”) of 28.5% and the same for the third quarter of 2023 but up from the 28.0% ETR recorded in the fourth quarter of 2022. The Bank’s ETR will fluctuate slightly from quarter to quarter within a fairly small range due to the timing of taxable events throughout the year.
Balance Sheet Summary
Total gross loans at December 31, 2023 were $5.28 billion, an increase of $198.7 million from the total of $5.07 billion as of December 31, 2022. Total deposits increased to $5.71 billion from the $5.56 billion as of December 31, 2022, an increase of $152.3 million. Total assets were $6.66 billion, an increase of $233.9 million over the total of $6.43 billion as of December 31, 2022.
Asset Quality
As of December 31, 2023, nonaccrual loans increased to $28.7 million, from $19.4 million reported as of September 30, 2023 and up from the $5.5 million reported as of December 31, 2022. Although an increase from September levels, we are confident in the expedient and low cost resolution of these credits. OREO and repossessed assets totaled $16.7 million as of December 31, 2023, no change from September 30, 2023. Classified and criticized assets declined from $115.3 million as of September 30, 2023 to $99.7 million as of December 31, 2023. Total net (recoveries) charge-offs were ($6,000) for the fourth quarter of 2023 as compared to net charge offs of $80,000 last quarter and compared to $0 for the fourth quarter last year. Management is acutely aware that commercial real estate is under some pressure given the change in interest rates over the past year, especially office properties. However in reviewing the portfolio, this weakness has yet to appear. We will be vigilant going forward.
Allowance for Credit Losses
The provision for credit losses for the fourth quarter of 2023 was $3.5 million compared to $3.5 million last quarter and compared to $2.0 million in the same quarter last year. Loan growth was the primary driver of the provision for the quarter. The Bank’s allowance coverage ratio now stands at 1.49% of total loans.
Capitalization
As of December 31, 2023, the Bank’s leverage ratio was 10.85%, the common equity tier 1 capital ratio was 11.57% and the total capital ratio stood at 15.18%. As of December 31, 2022, the Bank’s leverage ratio was 10.30%, the common equity tier 1 ratio was 10.81% and the total risk-based capital ratio was 14.39%.
Conference Call and Webcast
A conference call with simultaneous webcast to discuss Preferred Bank’s second quarter 2023 financial results will be held tomorrow, January 25, 2024 at 2:00 p.m. Eastern / 11:00 a.m. Pacific. Interested participants and investors may access the conference call by dialing 844-826-3037 (domestic) or 412-317-5182 (international) and referencing “Preferred Bank.” There will also be a live webcast of the call available at the Investor Relations section of Preferred Bank's website at www.preferredbank.com.
Preferred Bank's Chairman and CEO Li Yu, President and Chief Operating Officer Wellington Chen, Chief Financial Officer Edward J. Czajka, Chief Credit Officer Nick Pi and Deputy Chief Operating Officer Johnny Hsu will discuss Preferred Bank's financial results, business highlights and outlook. After the live webcast, a replay will be available at the Investor Relations section of Preferred Bank's website. A replay of the call will also be available at 877-344-7529 (domestic) or 412-317-0088 (international) through February 8, 2024; the passcode is 5055246.
About Preferred Bank
Preferred Bank is one of the larger independent commercial banks headquartered in California. The Bank is chartered by the State of California, and its deposits are insured by the Federal Deposit Insurance Corporation, or FDIC, to the maximum extent permitted by law. The Bank conducts its banking business from its main office in Los Angeles, California, and through twelve full-service branch banking offices in California (Alhambra, Century City, City of Industry, Torrance, Arcadia, Irvine (2), Diamond Bar, Pico Rivera, Tarzana and San Francisco (2)), one branch in Flushing, New York and a branch office in the Houston, Texas suburb of Sugar Land. Preferred Bank offers a broad range of deposit and loan products and services to both commercial and consumer customers. The Bank provides personalized deposit services as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses, entrepreneurs, real estate developers, professionals and high net worth individuals. Although originally founded as a Chinese-American Bank, Preferred Bank now derives most of its customers from the diversified mainstream market but does continue to benefit from the significant migration to California of ethnic Chinese from China and other areas of East Asia.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about the Bank’s future financial and operating results, the Bank's plans, objectives, expectations and intentions and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the Bank’s management and are subject to significant risks and uncertainties. Actual results may differ from those set forth in the forward-looking statements. The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: changes in economic conditions; changes in the California real estate market; the loss of senior management and other employees; natural disasters or recurring energy shortage; changes in interest rates; competition from other financial services companies; ineffective underwriting practices; inadequate allowance for loan and lease losses to cover actual losses; risks inherent in construction lending; adverse economic conditions in Asia; downturn in international trade; inability to attract deposits; inability to raise additional capital when needed or on favorable terms; inability to manage growth; inadequate communications, information, operating and financial control systems, technology from fourth party service providers; the U.S. government’s monetary policies; government regulation; environmental liability with respect to properties to which the bank takes title; and the threat of terrorism. Additional factors that could cause the Bank's results to differ materially from those described in the forward-looking statements can be found in the Bank’s 2022 Annual Report on Form 10-K filed with the Federal Deposit Insurance Corporation which can be found on Preferred Bank’s website. The forward-looking statements in this press release speak only as of the date of the press release, and the Bank assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements. For additional information about Preferred Bank, please visit the Bank’s website at www.preferredbank.com.
Financial Tables to Follow
| PREFERRED BANK | |||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||
| (unaudited) | |||||||||||
| (in thousands, except for net income per share and shares) | |||||||||||
| For the Quarter Ended | |||||||||||
| December 31, | September 30, | December 31, | |||||||||
| 2023 | 2023 | 2022 | |||||||||
| Interest income: | |||||||||||
| Loans, including fees | $ | 107,709 | $ | 106,695 | $ | 87,159 | |||||
| Investment securities | 16,973 | 18,556 | 11,028 | ||||||||
| Fed funds sold | 282 | 278 | 192 | ||||||||
| Total interest income | 124,964 | 125,529 | 98,379 | ||||||||
| Interest expense: | |||||||||||
| Interest-bearing demand | 21,716 | 20,257 | 13,906 | ||||||||
| Savings | 72 | 67 | 32 | ||||||||
| Time certificates | 32,455 | 29,369 | 9,004 | ||||||||
| FHLB borrowings | - | 1,557 | - | ||||||||
| Subordinated debt | 1,325 | 1,325 | 1,325 | ||||||||
| Total interest expense | 55,568 | 52,575 | 24,267 | ||||||||
| Net interest income | 69,396 | 72,954 | 74,112 | ||||||||
| Provision for credit losses | 3,500 | 3,500 | 2,000 | ||||||||
| Net interest income after provision for | |||||||||||
| credit losses | 65,896 | 69,454 | 72,112 | ||||||||
| Noninterest income: | |||||||||||
| Fees & service charges on deposit accounts | 857 | 939 | 631 | ||||||||
| Letters of credit fee income | 1,486 | 1,412 | 1,245 | ||||||||
| BOLI income | 105 | 103 | 102 | ||||||||
| Net (loss) gain on called and sale of investment securities | (929 | ) | - | 297 | |||||||
| Net gain on sale of loans | 205 | 21 | - | ||||||||
| Other income | 382 | 497 | 533 | ||||||||
| Total noninterest income | 2,106 | 2,972 | 2,808 | ||||||||
| Noninterest expense: | |||||||||||
| Salary and employee benefits | 12,058 | 13,008 | 12,953 | ||||||||
| Net occupancy expense | 1,536 | 1,563 | 1,444 | ||||||||
| Business development and promotion expense | 239 | 193 | 320 | ||||||||
| Professional services | 1,355 | 1,423 | 1,028 | ||||||||
| Office supplies and equipment expense | 391 | 395 | 460 | ||||||||
| Loss on sale of OREO, valuation allowance and related expense | 294 | 140 | 2,103 | ||||||||
| Other | 2,000 | 2,287 | 1,668 | ||||||||
| Total noninterest expense | 17,873 | 19,009 | 19,976 | ||||||||
| Income before provision for income taxes | 50,129 | 53,417 | 54,944 | ||||||||
| Income tax expense | 14,290 | 15,225 | 15,384 | ||||||||
| Net income | $ | 35,839 | $ | 38,192 | $ | 39,560 | |||||
| Income per share available to common shareholders | |||||||||||
| Basic | $ | 2.63 | $ | 2.74 | $ | 2.76 | |||||
| Diluted | $ | 2.60 | $ | 2.71 | $ | 2.71 | |||||
| Weighted-average common shares outstanding | |||||||||||
| Basic | 13,617,225 | 13,925,994 | 14,357,326 | ||||||||
| Diluted | 13,804,315 | 14,105,915 | 14,617,377 | ||||||||
| Cash dividends per common share | $ | 0.70 | $ | 0.55 | $ | 0.55 | |||||
| PREFERRED BANK | |||||||||||
| Condensed Consolidated Statements of Operations | |||||||||||
| (unaudited) | |||||||||||
| (in thousands, except for net income per share and shares) | |||||||||||
| For the Year Ended | |||||||||||
| December 31, | December 31, | Change | |||||||||
| 2023 | 2022 | % | |||||||||
| Interest income: | |||||||||||
| Loans, including fees | $ | 412,505 | $ | 269,011 | 53.3 | % | |||||
| Investment securities | 64,427 | 24,997 | 157.7 | % | |||||||
| Fed funds sold | 1,056 | 374 | 182.3 | % | |||||||
| Total interest income | 477,988 | 294,382 | 62.4 | % | |||||||
| Interest expense: | |||||||||||
| Interest-bearing demand | 75,417 | 24,221 | 211.4 | % | |||||||
| Savings | 225 | 91 | 147.4 | % | |||||||
| Time certificates | 103,853 | 17,412 | 496.4 | % | |||||||
| FHLB borrowings | 3,819 | - | 100.0 | % | |||||||
| Subordinated debt | 5,300 | 5,300 | -0.0 | % | |||||||
| Total interest expense | 188,614 | 47,024 | 301.1 | % | |||||||
| Net interest income | 289,374 | 247,358 | 17.0 | % | |||||||
| Provision for credit losses | 10,000 | 7,350 | 36.1 | % | |||||||
| Net interest income after provision for credit losses | 279,374 | 240,008 | 16.4 | % | |||||||
| Noninterest income: | |||||||||||
| Fees & service charges on deposit accounts | 3,333 | 2,728 | 22.2 | % | |||||||
| Letters of credit fee income | 5,798 | 4,463 | 29.9 | % | |||||||
| BOLI income | 412 | 401 | 2.7 | % | |||||||
| Net (loss) gain on called and sale of investment securities | (5,046 | ) | 297 | -1798.9 | % | ||||||
| Net gain on sale of loans | 752 | - | 100.0 | % | |||||||
| Other income | 1,864 | 1,973 | -5.5 | % | |||||||
| Total noninterest income | 7,113 | 9,862 | -27.9 | % | |||||||
| Noninterest expense: | |||||||||||
| Salary and employee benefits | 51,314 | 48,607 | 5.6 | % | |||||||
| Net occupancy expense | 6,049 | 5,759 | 5.0 | % | |||||||
| Business development and promotion expense | 737 | 811 | -9.1 | % | |||||||
| Professional services | 5,270 | 4,892 | 7.7 | % | |||||||
| Office supplies and equipment expense | 1,588 | 1,864 | -14.8 | % | |||||||
| Loss on sale of OREO, valuation allowance and related expense | 3,344 | 2,818 | 18.7 | % | |||||||
| Other | 8,332 | 5,922 | 40.7 | % | |||||||
| Total noninterest expense | 76,634 | 70,673 | 8.4 | % | |||||||
| Income before provision for income taxes | 209,853 | 179,197 | 17.1 | % | |||||||
| Income tax expense | 59,813 | 50,352 | 18.8 | % | |||||||
| Net income | $ | 150,040 | $ | 128,845 | 16.4 | % | |||||
| Dividend and earnings allocated to participating securities | $ | - | $ | (2 | ) | 100.0 | % | ||||
| Net income available to common shareholders | $ | 150,040 | $ | 128,843 | 16.5 | % | |||||
| Income per share available to common shareholders | |||||||||||
| Basic | $ | 10.64 | $ | 8.84 | 20.4 | % | |||||
| Diluted | $ | 10.52 | $ | 8.70 | 20.9 | % | |||||
| Weighted-average common shares outstanding | |||||||||||
| Basic | 14,095,745 | 14,579,132 | -3.3 | % | |||||||
| Diluted | 14,261,644 | 14,809,416 | -3.7 | % | |||||||
| Dividends per share | $ | 2.35 | $ | 1.84 | 27.7 | % | |||||
| PREFERRED BANK | |||||||
| Condensed Consolidated Statements of Financial Condition | |||||||
| (unaudited) | |||||||
| (in thousands) | |||||||
| December 31, | December 31, | ||||||
| 2023 | 2022 | ||||||
| (Unaudited) | (Audited) | ||||||
| Assets | |||||||
| Cash and due from banks | $ | 890,852 | $ | 747,526 | |||
| Fed funds sold | 20,000 | 20,000 | |||||
| Cash and cash equivalents | 910,852 | 767,526 | |||||
| Securities held-to-maturity, at amortized cost | 21,171 | 22,459 | |||||
| Securities available-for-sale, at fair value | 313,842 | 428,295 | |||||
| Loans | 5,273,498 | 5,074,793 | |||||
| Less allowance for credit losses | (78,355 | ) | (68,472 | ) | |||
| Less amortized deferred loan fees, net | (11,079 | ) | (9,939 | ) | |||
| Loans, net | 5,184,064 | 4,996,382 | |||||
| Loans held for sale, at lower of cost or fair value | 360 | - | |||||
| Other real estate owned and repossessed assets | 16,716 | 21,990 | |||||
| Customers' liability on acceptances | 315 | 1,731 | |||||
| Bank furniture and fixtures, net | 9,694 | 8,999 | |||||
| Bank-owned life insurance | 10,632 | 10,357 | |||||
| Accrued interest receivable | 33,892 | 23,593 | |||||
| Investment in affordable housing partnerships | 65,276 | 61,173 | |||||
| Federal Home Loan Bank stock, at cost | 15,000 | 15,000 | |||||
| Deferred tax assets | 44,446 | 43,218 | |||||
| Income tax receivable | 6,936 | - | |||||
| Operating lease right-of-use assets | 22,050 | 21,718 | |||||
| Other assets | 4,030 | 2,917 | |||||
| Total assets | $ | 6,659,276 | $ | 6,425,358 | |||
| Liabilities and Shareholders' Equity | |||||||
| Deposits: | |||||||
| Noninterest bearing demand deposits | $ | 786,995 | $ | 1,192,091 | |||
| Interest bearing deposits: | 2,075,156 | 2,295,212 | |||||
| Savings | 29,167 | 39,527 | |||||
| Time certificates of $250,000 or more | 1,317,862 | 1,138,727 | |||||
| Other time certificates | 1,500,162 | 891,440 | |||||
| Total deposits | 5,709,342 | 5,556,997 | |||||
| Acceptances outstanding | 315 | 1,731 | |||||
| Subordinated debt issuance, net | 148,232 | 147,995 | |||||
| Commitments to fund investment in affordable housing partnerships | 30,824 | 27,490 | |||||
| Operating lease liabilities | 19,766 | 20,949 | |||||
| Accrued interest payable | 16,124 | 2,608 | |||||
| Other liabilities | 39,568 | 37,162 | |||||
| Total liabilities | 5,964,171 | 5,794,932 | |||||
| Shareholders' equity | 695,105 | 630,426 | |||||
| Total liabilities and shareholders' equity | $ | 6,659,276 | $ | 6,425,358 | |||
| Book value per common share | $ | 50.54 | $ | 43.91 | |||
| Number of common shares outstanding | 13,753,246 | 14,358,145 | |||||
| PREFERRED BANK | |||||||||||||||
| Selected Consolidated Financial Information | |||||||||||||||
| (unaudited) | |||||||||||||||
| (in thousands, except for ratios) | |||||||||||||||
| For the Quarter Ended | |||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||
| 2023 | 2023 | 2023 | 2023 | 2022 | |||||||||||
| Unaudited historical quarterly operations data: | |||||||||||||||
| Interest income | $ | 124,964 | $ | 125,529 | $ | 118,411 | $ | 109,084 | $ | 98,379 | |||||
| Interest expense | 55,568 | 52,575 | 45,102 | 35,369 | 24,267 | ||||||||||
| Interest income before provision for credit losses | 69,396 | 72,954 | 73,309 | 73,715 | 74,112 | ||||||||||
| Provision for credit losses | 3,500 | 3,500 | 2,500 | 500 | 2,000 | ||||||||||
| Noninterest income | 2,106 | 2,972 | 3,101 | (1,066 | ) | 2,808 | |||||||||
| Noninterest expense | 17,873 | 19,009 | 20,852 | 18,899 | 19,976 | ||||||||||
| Income tax expense | 14,290 | 15,225 | 15,122 | 15,176 | 15,384 | ||||||||||
| Net income | $ | 35,839 | $ | 38,192 | $ | 37,936 | $ | 38,074 | $ | 39,560 | |||||
| Earnings per share | |||||||||||||||
| Basic | $ | 2.63 | $ | 2.74 | $ | 2.63 | $ | 2.64 | $ | 2.76 | |||||
| Diluted | $ | 2.60 | $ | 2.71 | $ | 2.61 | $ | 2.61 | $ | 2.71 | |||||
| Ratios for the period: | |||||||||||||||
| Return on average assets | 2.15 | % | 2.25 | % | 2.32 | % | 2.41 | % | 2.48 | % | |||||
| Return on beginning equity | 21.21 | % | 22.66 | % | 23.18 | % | 24.49 | % | 26.58 | % | |||||
| Net interest margin (Fully-taxable equivalent) | 4.24 | % | 4.39 | % | 4.58 | % | 4.77 | % | 4.75 | % | |||||
| Noninterest expense to average assets | 1.07 | % | 1.12 | % | 1.28 | % | 1.20 | % | 1.25 | % | |||||
| Efficiency ratio | 25.00 | % | 25.04 | % | 27.29 | % | 26.01 | % | 25.97 | % | |||||
| Net charge-offs (recoveries) to average loans (annualized) | -0.00 | % | 0.01 | % | -0.00 | % | 0.00 | % | 0.00 | % | |||||
| Ratios as of period end: | |||||||||||||||
| Tier 1 leverage capital ratio | 10.85 | % | 10.46 | % | 10.61 | % | 10.63 | % | 10.30 | % | |||||
| Common equity tier 1 risk-based capital ratio | 11.57 | % | 11.63 | % | 11.51 | % | 11.30 | % | 10.81 | % | |||||
| Tier 1 risk-based capital ratio | 11.57 | % | 11.63 | % | 11.51 | % | 11.30 | % | 10.81 | % | |||||
| Total risk-based capital ratio | 15.18 | % | 15.32 | % | 15.14 | % | 14.91 | % | 14.39 | % | |||||
| Allowances for credit losses to loans at end of period | 1.49 | % | 1.46 | % | 1.40 | % | 1.36 | % | 1.35 | % | |||||
| Allowance for credit losses to non-performing loans | 2.73x | 3.86x | 13.86x | 254.56x | 12.49x | ||||||||||
| Average balances: | |||||||||||||||
| Total securities | $ | 349,863 | $ | 368,968 | $ | 397,905 | $ | 442,852 | $ | 434,830 | |||||
| Total loans | 5,126,918 | 5,086,241 | 5,044,004 | 5,012,862 | 4,981,561 | ||||||||||
| Total earning assets | 6,499,469 | 6,597,557 | 6,432,950 | 6,276,630 | 6,193,330 | ||||||||||
| Total assets | 6,627,349 | 6,719,859 | 6,558,651 | 6,400,849 | 6,328,017 | ||||||||||
| Total time certificate of deposits | 2,767,385 | 2,680,854 | 2,617,872 | 2,209,370 | 1,872,239 | ||||||||||
| Total interest bearing deposits | 4,906,947 | 4,800,227 | 4,549,519 | 4,451,299 | 4,287,287 | ||||||||||
| Total deposits | 5,689,713 | 5,654,350 | 5,481,457 | 5,479,945 | 5,468,562 | ||||||||||
| Total interest bearing liabilities | 5,055,143 | 5,069,014 | 4,847,596 | 4,630,982 | 4,435,245 | ||||||||||
| Total equity | 683,141 | 678,020 | 677,306 | 650,963 | 613,729 | ||||||||||
| PREFERRED BANK | |||||||
| Selected Consolidated Financial Information | |||||||
| (unaudited) | |||||||
| (in thousands, except for ratios) | |||||||
| For the Year Ended | |||||||
| December 31, | December 31, | ||||||
| 2023 | 2022 | ||||||
| Interest income | $ | 477,988 | $ | 294,382 | |||
| Interest expense | 188,614 | 47,024 | |||||
| Interest income before provision for credit losses | 289,374 | 247,358 | |||||
| Provision for credit losses | 10,000 | 7,350 | |||||
| Noninterest income | 7,113 | 9,862 | |||||
| Noninterest expense | 76,634 | 70,673 | |||||
| Income tax expense | 59,813 | 50,352 | |||||
| Net income | $ | 150,040 | $ | 128,845 | |||
| Earnings per share | |||||||
| Basic | $ | 10.64 | $ | 8.84 | |||
| Diluted | $ | 10.52 | $ | 8.70 | |||
| Ratios for the period: | |||||||
| Return on average assets | 2.28 | % | 2.08 | % | |||
| Return on beginning equity | 23.80 | % | 21.96 | % | |||
| Net interest margin (Fully-taxable equivalent) | 4.49 | % | 4.09 | % | |||
| Noninterest expense to average assets | 1.17 | % | 1.14 | % | |||
| Efficiency ratio | 25.85 | % | 27.48 | % | |||
| Net charge-off (recoveries) to average loans | 0.00 | % | -0.02 | % | |||
| Average balances: | |||||||
| Total securities | $ | 389,584 | $ | 432,777 | |||
| Total loans | 5,067,870 | 4,760,815 | |||||
| Total earning assets | 6,452,661 | 6,054,932 | |||||
| Total assets | 6,577,690 | 6,181,138 | |||||
| Total time certificate of deposits | 2,570,706 | 1,825,307 | |||||
| Total interest bearing deposits | 4,678,893 | 4,048,450 | |||||
| Total deposits | 5,577,155 | 5,340,533 | |||||
| Total interest bearing liabilities | 4,902,616 | 4,196,321 | |||||
| Total equity | 672,461 | 603,878 | |||||
| PREFERRED BANK | |||||||||||||||||||
| Selected Consolidated Financial Information | |||||||||||||||||||
| (unaudited) | |||||||||||||||||||
| (in thousands, except for ratios) | |||||||||||||||||||
| As of | |||||||||||||||||||
| December 31, | September 30, | June 30, | March 31, | December 31, | |||||||||||||||
| 2023 | 2023 | 2023 | 2023 | 2022 | |||||||||||||||
| Unaudited quarterly statement of financial position data: | |||||||||||||||||||
| Assets: | |||||||||||||||||||
| Cash and cash equivalents | $ | 910,852 | $ | 1,021,108 | $ | 1,049,745 | $ | 885,691 | $ | 767,526 | |||||||||
| Securities held-to-maturity, at amortized cost | 21,171 | 21,474 | 21,818 | 22,155 | 22,459 | ||||||||||||||
| Securities available-for-sale, at fair value | 313,842 | 335,608 | 352,548 | 367,492 | 428,295 | ||||||||||||||
| Loans: | |||||||||||||||||||
| Real estate – Mortgage: | |||||||||||||||||||
| Real estate—Residential | $ | 688,057 | $ | 663,021 | $ | 631,795 | $ | 612,907 | $ | 609,292 | |||||||||
| Real estate—Commercial | 2,760,762 | 2,688,148 | 2,744,074 | 2,813,681 | 2,730,726 | ||||||||||||||
| Total Real Estate – Mortgage | 3,448,819 | 3,351,169 | 3,375,879 | 3,426,588 | 3,340,018 | ||||||||||||||
| Real estate – Construction: | |||||||||||||||||||
| R/E Construction — Residential | 246,201 | 226,482 | 186,239 | 175,286 | 193,027 | ||||||||||||||
| R/E Construction — Commercial | 179,775 | 164,666 | 153,418 | 142,319 | 204,478 | ||||||||||||||
| Total real estate construction loans | 425,976 | 391,148 | 339,657 | 317,605 | 397,505 | ||||||||||||||
| Commercial and industrial | 1,393,830 | 1,377,675 | 1,388,865 | 1,299,325 | 1,320,830 | ||||||||||||||
| SBA | 3,469 | 2,424 | 4,427 | 7,306 | 11,339 | ||||||||||||||
| Trade finance | 1,041 | 5,541 | 9,348 | 6,885 | 4,521 | ||||||||||||||
| Consumer and others | 363 | 285 | 345 | 19 | 580 | ||||||||||||||
| Gross loans | 5,273,498 | 5,128,242 | 5,118,511 | 5,057,728 | 5,074,793 | ||||||||||||||
| Allowance for credit losses on loans | (78,355 | ) | (74,849 | ) | (71,429 | ) | (68,929 | ) | (68,472 | ) | |||||||||
| Net deferred loan fees | (11,079 | ) | (10,240 | ) | (10,464 | ) | (10,286 | ) | (9,939 | ) | |||||||||
| Net loans, excluding loans held for sale | $ | 5,184,064 | $ | 5,043,153 | $ | 5,036,618 | $ | 4,978,513 | $ | 4,996,382 | |||||||||
| Loans held for sale | $ | 360 | $ | - | $ | 176 | $ | - | $ | - | |||||||||
| Net loans | $ | 5,184,424 | $ | 5,043,153 | $ | 5,036,794 | $ | 4,978,513 | $ | 4,996,382 | |||||||||
| Other real estate owned and repossessed assets | $ | 16,716 | $ | 16,716 | $ | 16,728 | $ | 18,628 | $ | 21,990 | |||||||||
| Investment in affordable housing partnerships | 65,276 | 54,679 | 56,844 | 59,009 | 61,173 | ||||||||||||||
| Federal Home Loan Bank stock, at cost | 15,000 | 15,000 | 15,000 | 15,000 | 15,000 | ||||||||||||||
| Other assets | 131,995 | 124,793 | 118,465 | 115,049 | 112,533 | ||||||||||||||
| Total assets | $ | 6,659,276 | $ | 6,632,530 | $ | 6,667,942 | $ | 6,461,537 | $ | 6,425,358 | |||||||||
| Liabilities: | |||||||||||||||||||
| Deposits: | |||||||||||||||||||
| Demand | $ | 786,995 | $ | 838,300 | $ | 870,282 | $ | 1,050,992 | $ | 1,192,091 | |||||||||
| Interest bearing demand | 2,075,156 | 2,091,384 | 2,005,298 | 1,751,439 | 2,295,212 | ||||||||||||||
| Savings | 29,167 | 30,427 | 32,089 | 33,861 | 39,527 | ||||||||||||||
| Time certificates of $250,000 or more | 1,317,862 | 1,283,461 | 1,244,128 | 1,329,720 | 1,138,727 | ||||||||||||||
| Other time certificates | 1,500,162 | 1,439,699 | 1,437,194 | 1,241,754 | 891,440 | ||||||||||||||
| Total deposits | $ | 5,709,342 | $ | 5,683,271 | $ | 5,588,991 | $ | 5,407,766 | $ | 5,556,997 | |||||||||
| Acceptances outstanding | $ | 315 | $ | 103 | $ | 448 | $ | 107 | $ | 1,731 | |||||||||
| Advance from Federal Home Loan Bank | - | - | 150,000 | 150,000 | - | ||||||||||||||
| Subordinated debt issuance, net | 148,232 | 148,173 | 148,114 | 148,055 | 147,995 | ||||||||||||||
| Commitments to fund investment in affordable housing partnerships | 30,824 | 20,824 | 20,930 | 26,709 | 27,490 | ||||||||||||||
| Other liabilities | 75,458 | 109,651 | 90,692 | 72,359 | 60,074 | ||||||||||||||
| Total liabilities | $ | 5,964,171 | $ | 5,962,022 | $ | 5,999,175 | $ | 5,804,996 | $ | 5,794,287 | |||||||||
| Equity: | |||||||||||||||||||
| Net common stock, no par value | $ | 134,534 | $ | 143,584 | $ | 167,404 | $ | 181,208 | $ | 184,604 | |||||||||
| Retained earnings | 592,325 | 566,027 | 535,373 | 505,207 | 475,072 | ||||||||||||||
| Accumulated other comprehensive income | (31,754 | ) | (39,103 | ) | (34,010 | ) | (29,874 | ) | (28,605 | ) | |||||||||
| Total shareholders' equity | $ | 695,105 | $ | 670,508 | $ | 668,767 | $ | 656,541 | $ | 631,071 | |||||||||
| Total liabilities and shareholders' equity | $ | 6,659,276 | $ | 6,632,530 | $ | 6,667,942 | $ | 6,461,537 | $ | 6,425,358 | |||||||||
| PREFERRED BANK | |||||||||||||||||||||||
| Quarter-to-Date Average Balances, Yield and Rates | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Three months ended December 31, | Three months ended September 30, | Three months ended December 31, | |||||||||||||||||||||
| 2023 | 2023 | 2022 | |||||||||||||||||||||
| Interest | Average | Interest | Average | Interest | Average | ||||||||||||||||||
| Average | Income or | Yield/ | Average | Income or | Yield/ | Average | Income or | Yield/ | |||||||||||||||
| Balance | Expense | Rate | Balance | Expense | Rate | Balance | Expense | Rate | |||||||||||||||
| ASSETS | (Dollars in thousands) | ||||||||||||||||||||||
| Interest earning assets: | |||||||||||||||||||||||
| Loans(1,2) | $ | 5,127,935 | $ | 107,709 | 8.33 | % | $ | 5,086,302 | $ | 106,695 | 8.32 | % | $ | 4,981,561 | $ | 87,159 | 6.94 | % | |||||
| Investment securities(3) | 349,863 | 3,335 | 3.78 | % | 368,968 | 3,422 | 3.68 | % | 434,830 | 3,993 | 3.64 | % | |||||||||||
| Federal funds sold | 20,028 | 282 | 5.58 | % | 20,111 | 278 | 5.48 | % | 20,000 | 192 | 3.81 | % | |||||||||||
| Other earning assets | 1,001,643 | 13,739 | 5.44 | % | 1,122,176 | 15,235 | 5.39 | % | 756,939 | 7,139 | 3.74 | % | |||||||||||
| Total interest earning assets | 6,499,469 | 125,065 | 7.63 | % | 6,597,557 | 125,630 | 7.55 | % | 6,193,330 | 98,483 | 6.31 | % | |||||||||||
| Deferred loan fees, net | (10,421 | ) | (10,071 | ) | (10,003 | ) | |||||||||||||||||
| Allowance for credit losses on loans | (74,965 | ) | (71,503 | ) | (66,515 | ) | |||||||||||||||||
| Noninterest earning assets: | |||||||||||||||||||||||
| Cash and due from banks | 12,376 | 12,101 | 11,569 | ||||||||||||||||||||
| Bank furniture and fixtures | 9,243 | 8,814 | 9,237 | ||||||||||||||||||||
| Right of use assets | 20,338 | 21,491 | 22,002 | ||||||||||||||||||||
| Other assets | 171,309 | 161,470 | 168,397 | ||||||||||||||||||||
| Total assets | $ | 6,627,349 | $ | 6,719,859 | $ | 6,328,017 | |||||||||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||||||||||
| Interest bearing liabilities: | |||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||
| Interest bearing demand and savings | $ | 2,139,562 | $ | 21,788 | 4.04 | % | $ | 2,119,373 | $ | 20,324 | 3.80 | % | $ | 2,415,048 | $ | 13,938 | 2.29 | % | |||||
| TCD $250K or more | 1,294,531 | 15,600 | 4.78 | % | 1,251,397 | 14,085 | 4.47 | % | 1,017,302 | 6,014 | 2.35 | % | |||||||||||
| Other time certificates | 1,472,854 | 16,855 | 4.54 | % | 1,429,457 | 15,284 | 4.24 | % | 854,937 | 2,990 | 1.39 | % | |||||||||||
| Total interest bearing deposits | 4,906,947 | 54,243 | 4.39 | % | 4,800,227 | 49,693 | 4.11 | % | 4,287,287 | 22,942 | 2.12 | % | |||||||||||
| Short-term borrowings | 2 | 0 | 6.08 | % | - | - | 0.00 | % | - | - | 0.00 | % | |||||||||||
| Advance from Federal home loan bank | - | - | 0.00 | % | 120,652 | 1,557 | 5.12 | % | - | - | 0.00 | % | |||||||||||
| Subordinated debt, net | 148,194 | 1,325 | 3.55 | % | 148,135 | 1,325 | 3.55 | % | 147,958 | 1,325 | 3.55 | % | |||||||||||
| Total interest bearing liabilities | 5,055,143 | 55,568 | 4.36 | % | 5,069,014 | 52,575 | 4.11 | % | 4,435,245 | 24,267 | 2.17 | % | |||||||||||
| Noninterest bearing liabilities: | |||||||||||||||||||||||
| Demand deposits | 782,766 | 854,123 | 1,181,275 | ||||||||||||||||||||
| Lease Liability | 18,179 | 19,759 | 21,542 | ||||||||||||||||||||
| Other liabilities | 88,120 | 98,943 | 76,212 | ||||||||||||||||||||
| Total liabilities | 5,944,208 | 6,041,839 | 5,714,274 | ||||||||||||||||||||
| Shareholders’ equity | 683,141 | 678,020 | 613,743 | ||||||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 6,627,349 | $ | 6,719,859 | $ | 6,328,017 | |||||||||||||||||
| Net interest income | $ | 69,497 | $ | 73,055 | $ | 74,216 | |||||||||||||||||
| Net interest spread | 3.27 | % | 3.44 | % | 4.14 | % | |||||||||||||||||
| Net interest margin | 4.24 | % | 4.39 | % | 4.75 | % | |||||||||||||||||
| Cost of Deposits: | |||||||||||||||||||||||
| Noninterest bearing demand deposits | $ | 782,766 | $ | 854,123 | $ | 1,181,275 | |||||||||||||||||
| Interest bearing deposits | 4,906,947 | 54,243 | 4.39 | % | 4,800,227 | 49,693 | 4.11 | % | 4,287,287 | 22,942 | 2.12 | % | |||||||||||
| Total Deposits | $ | 5,689,713 | $ | 54,243 | 3.78 | % | $ | 5,654,350 | $ | 49,693 | 3.49 | % | $ | 5,468,562 | $ | 22,942 | 1.66 | % | |||||
| (1) Includes non-accrual loans and loans held for sale | |||||||||||||||||||||||
| (2) Net loan fee income of $1.0 million, $1.1 million and $972,000 for the quarter ended December 31, 2023, September 30, 2023, and December 31, 2022, respectively, are included in the yield computations | |||||||||||||||||||||||
| (3) Yields on securities have been adjusted to a tax-equivalent basis | |||||||||||||||||||||||
| PREFERRED BANK | |||||||||||||||
| Year-to-Date Average Balances, Yield and Rates | |||||||||||||||
| (unaudited) | |||||||||||||||
| Year ended December 31, | |||||||||||||||
| 2023 | 2022 | ||||||||||||||
| Interest | Average | Interest | Average | ||||||||||||
| Average | Income or | Yield/ | Average | Income or | Yield/ | ||||||||||
| Balance | Expense | Rate | Balance | Expense | Rate | ||||||||||
| ASSETS | (Dollars in thousands) | ||||||||||||||
| Interest earning assets: | |||||||||||||||
| Loans(1,2) | $ | 5,068,486 | $ | 412,505 | 8.14 | % | $ | 4,760,815 | $ | 269,011 | 5.65 | % | |||
| Investment securities(3) | 389,584 | 14,461 | 3.71 | % | 432,777 | 11,584 | 2.68 | % | |||||||
| Federal funds sold | 20,090 | 1,056 | 5.25 | % | 20,070 | 374 | 1.86 | % | |||||||
| Other earning assets | 974,501 | 50,372 | 5.17 | % | 841,270 | 13,837 | 1.64 | % | |||||||
| Total interest earning assets | 6,452,661 | 478,394 | 7.41 | % | 6,054,932 | 294,806 | 4.87 | % | |||||||
| Deferred loan fees, net | (10,212 | ) | (8,697 | ) | |||||||||||
| Allowance for credit losses on loans | (70,992 | ) | (61,645 | ) | |||||||||||
| Noninterest earning assets: | |||||||||||||||
| Cash and due from banks | 11,978 | 11,068 | |||||||||||||
| Bank furniture and fixtures | 9,010 | 9,826 | |||||||||||||
| Right of use assets | 21,417 | 21,612 | |||||||||||||
| Other assets | 163,828 | 154,042 | |||||||||||||
| Total assets | $ | 6,577,690 | $ | 6,181,138 | |||||||||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||||||||
| Interest bearing liabilities: | |||||||||||||||
| Deposits: | |||||||||||||||
| Interest bearing demand/ savings | $ | 2,108,187 | $ | 75,642 | 3.59 | % | $ | 2,223,143 | $ | 24,312 | 1.09 | % | |||
| TCD $250K or more | 1,267,859 | 53,200 | 4.20 | % | 938,491 | 10,768 | 1.15 | % | |||||||
| Other time certificates | 1,302,847 | 50,653 | 3.89 | % | 886,816 | 6,644 | 0.75 | % | |||||||
| Total interest \bearing deposits | 4,678,893 | 179,495 | 3.84 | % | 4,048,450 | 41,724 | 1.03 | % | |||||||
| Short-term borrowings | 1 | 0 | 3.06 | % | - | - | 0.00 | % | |||||||
| Advance from Federal home loan bank | 75,616 | 3,819 | 5.05 | % | 147,871 | 5,300 | 3.58 | % | |||||||
| Subordinated debt, net | 148,106 | 5,300 | 3.58 | % | - | - | 0.00 | % | |||||||
| Total interest bearing liabilities | 4,902,616 | 188,614 | 3.85 | % | 4,196,321 | 47,024 | 1.12 | % | |||||||
| Noninterest bearing liabilities: | |||||||||||||||
| Demand deposits | 898,262 | 1,292,083 | |||||||||||||
| Lease Liability | 19,902 | 21,731 | |||||||||||||
| Other liabilities | 84,449 | 67,125 | |||||||||||||
| Total liabilities | 5,905,229 | 5,577,260 | |||||||||||||
| Shareholders’ equity | 672,461 | 603,878 | |||||||||||||
| Total liabilities and shareholders’ equity | $ | 6,577,690 | $ | 6,181,138 | |||||||||||
| Net interest income | $ | 289,780 | $ | 247,782 | |||||||||||
| Net interest spread | 3.57 | % | 3.75 | % | |||||||||||
| Net interest margin | 4.49 | % | 4.09 | % | |||||||||||
| Cost of Deposits: | |||||||||||||||
| Noninterest bearing demand deposits | $ | 898,262 | $ | 1,292,083 | |||||||||||
| Interest bearing deposits | 4,678,893 | 179,495 | 3.84 | % | 4,048,450 | 41,724 | 1.03 | % | |||||||
| Total Deposits | $ | 5,577,155 | $ | 179,495 | 3.22 | % | $ | 5,340,533 | $ | 41,724 | 0.78 | % | |||
| (1) Includes non-accrual loans and loans held for sale | |||||||||||||||
| (2) Net loan fee income of $4.2 million and $3.8 million for the year ended December 31, 2023 and 2022, respectively, are included in the yield computations | |||||||||||||||
| (3) Yields on securities have been adjusted to a tax-equivalent basis | |||||||||||||||
| Preferred Bank | |||||||
| Loan and Credit Quality Information | |||||||
| Allowance For Credit Losses History | |||||||
| Year ended | |||||||
| December 31, 2023 | December 31, 2022 | ||||||
| (Dollars in 000's) | |||||||
| Allowance For Credit Losses | |||||||
| Balance at Beginning of Period | $ | 68,472 | $ | 59,969 | |||
| Charge-Offs | |||||||
| Commercial & Industrial | 124 | 1,222 | |||||
| Mini-perm Real Estate | - | 1 | |||||
| Total Charge-Offs | 124 | 1,223 | |||||
| Recoveries | |||||||
| Commercial & Industrial | 7 | - | |||||
| Mini-perm Real Estate | - | 2,376 | |||||
| Total Recoveries | 7 | 2,376 | |||||
| Net Charge-Offs (recoveries) | 117 | (1,153 | ) | ||||
| Provision for Credit Losses: | 10,000 | 7,350 | |||||
| Balance at End of Period | $ | 78,355 | $ | 68,472 | |||
| Average Loans Held for Investment | $ | 5,067,870 | $ | 4,760,815 | |||
| Loans Held for Investment at End of Period | $ | 5,273,498 | $ | 5,074,793 | |||
| Net Charge-Offs (recoveries) to Average Loans | 0.00 | % | -0.02 | % | |||
| Allowances for Credit Losses to Loans at End of Period | 1.49 | % | 1.35 | % | |||
| AT THE COMPANY: | AT FINANCIAL PROFILES: |
| Edward J. Czajka | Jeffrey Haas |
| Executive Vice President | General Information |
| Chief Financial Officer | (310) 622-8240 |
| (213) 891-1188 | [email protected] |
